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E-commerce is changing. Constantly.
But one thing that remains the same even decades later is the psychology behind receiving discounts.Customers love discounts.
It makes them happier and keeps them coming back for more. The more personalized and targeted discounts you offer, the more your customers feel valued and appreciated, ultimately driving up the average order value (AOV) as they are incentivized to make larger purchases.
Offering tiered discounts is one such effective and psychology-backed discount strategy to increase brand loyalty, AOV, and overall sales.
By structuring discounts in tiers based on purchase thresholds, you not only encourage repeat purchases but also motivate customers to spend more to unlock higher discount tiers.
What is a Tiered Discount?
A tiered discount is a pricing strategy where the discount offered increases as the customer buys more or spends more money.
It is pretty similar to leveling up in a game where you start with a lesser discount, but the more you spend, the greater discounts you get.
Forever 21's "Buy More, Save More" offer is a perfect tiered discount example where if you buy 2 sale items, you get 25% off; if you buy 3 sale items, you get 30% off; and if you buy 4 sale items, you get 35% off.
On one hand, this tiered discount structure benefits the buyers by providing them with greater savings while on the other hand, the seller gets increased average order value (AOV) and larger transactions.
In short, customers are motivated to buy more items so that they get the most out of the discounts, resulting in higher overall sales for the brand.
Understanding the Psychological Drivers Behind Tiered Discounts
Those "spend more, save more" deals you often see in your inbox or during a store visit, aren't just a ‘good deal’.
They're, in fact, clever strategies rooted in psychology that tap into a buyer’s natural tendencies and motivations.
At its core, tiered discounts work by leveraging the human desire for progression and accomplishment.
Such discount strategies give customers agency and a sense of control by allowing them to decide how much they want to spend to get better deals.
Such control empowers buyers and makes them feel like they're getting a good deal tailored to their likes and preferences.
To design tiered discount programs that effectively engage customers and foster loyalty, it is important for sellers to understand these psychological factors.
Top 6 Tiered Discount Examples
1. H&M
H&M, the giant fast-fashion retailer, is pretty smart with its tiered discount approach. They simply want you to buy more to get bigger discounts. By offering increasing discounts as shoppers reach higher spending thresholds, H&M effectively incentivizes customers to add more items to their carts, ultimately boosting the average order value. H&M Tiered Discount:
- On spending $60, you get 15% Off
- On spending $100, you get 20% Off
- On spending $125, you get 25% Off
This simple strategy helps H&M drive immediate sales and foster long-term customer loyalty. On top of it, the clear and straightforward nature of the discount structure simplifies decision-making for shoppers, improving their overall shopping experience.
2. Shein
Shein's tiered discount approach is multifaceted. It aims to provide customers with both immediate savings and long-term benefits.
By offering graduated discounts based on spending thresholds, Shein encourages buyers to increase their cart value in order to get higher savings.
Through the code US24J10, buyers get 10% off orders over $69, 15% off orders over $109, and 20% off orders over $189.
But Shein doesn't stop at just discounts.
They use the opportunity to offer additional perks through their loyalty program, Shein Club.
- Exclusive 5% off on 100k+ items: Shein Club members get an additional discount on more than 100k products, which gives a sense of exclusivity and bigger savings.
- 12x Free Shipping Coupons: Members receive free shipping coupons to use throughout the year, making their online shopping experience both affordable and convenient.
3. Skechers
Skechers' tiered discount strategy may seem simple but is actually highly effective. They want you to find more things you love and fill up your carts so that you can get better discounts. Here’s how the offer works:
- On buying 1 item, you save 10%.
- On buying 2 items, you save 20%.
- On buying 3 items, you save 25%.
- Bonus for VIPs: If you're a VIP member, you get an extra 5% off.
As buyers add more shoes to their cart, they unlock progressively greater discounts, encouraging them to shop for additional products.
Skechers also rewards its VIP members with an exclusive benefit of an extra 5% discount on apparel purchases, increasing their savings and strengthening their relationship with the brand.
This tiered pricing model boosts sales and fosters repeat business and engagement with Skechers' loyalty program.
4. Bershka
Bershka's tiered discount offer is super rewarding and straightforward. Whether you're buying two items or going for more, you're guaranteed to save money. Here’s how the discount works:
- On buying 2 items, get 10% off each item.
- On buying 3 or more items, get 15% off your entire purchase.
Plus, the discount is applied automatically when you check out.
Safe to say, Bershka's tiered discount strategy is one well-thought approach to boosting AOV while simultaneously enhancing customer satisfaction and loyalty.
5. Sephora
Sephora's tiered discount strategy is all about rewarding its most loyal customers with the biggest discounts. Plus, having a limited-time sale further incites FOMO among the buyers, driving impulse purchases, and enhancing customer engagement.In their Beauty Pass Sale, Sephora gives discounts based on membership level:
- Gold and Black members get a 20% discount which is applicable from 2-6 September.
- White members still get a nice 15% off which is applicable from 3-6 September.
By offering higher discounts to their top-tier members, Sephora wisely encourages customers to reach higher membership tiers while cultivating a sense of exclusivity and appreciation among their most loyal customers.
With Kite, creating tiered discounts for your Shopify store is extremely simple and quick.
Check out how it only takes 5 minutes to get your tiered discounts up and running with Kite.
6. Alexis Bittar
Alexis Bittar's Buy More Save More event is designed to encourage customers to spend more by offering increasingly attractive discounts as the purchase value rises:
- Spend $100+: Get an extra 15% off with code SALE15.
- Spend $300+: Enjoy a generous 20% discount with code SALE20.
- Spend $500+: Reap maximum savings with 25% off using code SALE25.
This tiered discount strategy not only increases the average order value (AOV) but also rewards customers for their higher spending.
The use of promo codes adds an interactive element to the promotion, further engaging customers and providing a sense of exclusivity.
Ready to Launch Your Tiered Discount Strategy?
If done right, tiered discount strategies are an effective way to increase your Average Order Value (AOV) and make customers your lifelong admirers.
At Skai Lama, we've helped countless brands worldwide achieve increased AOV, retention rates, a 5x return on investment (ROI), and overall success for your Shopify store.
With Kite, our flagship product, we've seen an average increase of 32% in AOV for Shopify stores. Kite is designed to automate enticing promotions like free gifts, tiered discounts, and buy-one-get-one offers, seamlessly integrating with Shopify stores to drive results.
To learn more about how Skai Lama can transform your Shopify store and maximize your profits, book a demo or check out our apps on the Shopify App Store today.
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